What Is the First-Mover Advantage?

First-mover advantage is a Chinese vocabulary. By definition, the forerunner has a monopoly position on revolutionary products, that is, the lasting competitive advantage brought by leading technology and products. The advantage is that pioneers have the opportunity to explore network effects. In the high-tech industry, companies often compete in order to be the first to develop revolutionary new products, that is, the competition becomes the forerunner. By definition, the pioneers have a monopoly on revolutionary products. If the new product satisfies the customer's unmet needs and the demand is great, the pioneers can get great income and profits. The so-called first-mover advantage is the lasting competitive advantage brought by leading technology and products.

First mover advantage

The advantages obtained by the first movers come from five aspects:

First, the pioneers have the opportunity to explore network effects and positive feedback loops to block competitors' technologies.

Second, early movers can build important brand loyalty, and latecomers are hard to break.

Third, pioneers may have the opportunity to limit sales to competitors and achieve cost advantages through economies of scale and learning effects.

Secondly, the pioneers create conversion costs for customers who use it, and it is difficult for latecomers to seize them.

Finally, the pioneers may accumulate valuable knowledge about customer needs, distribution channels, product technology, process technology, and so on.

First movers also face first mover disadvantages and risks.

First, the first movers need to bear significant leading costs, while the later ones don't.

Second, similarly, pioneers are more likely to make mistakes because new markets face many uncertainties. Latecomers can learn from the mistakes of the forerunners, improve products, put better quality products on the market, and grab the forerunner's market share.

Third, pioneers may run the risk of misallocating resources and capabilities because the customers they face do not have mass market characteristics.

Finally, pioneers may mistakenly invest in second-rate or outdated technology.